Customers safer for NBN controls

NBN Co lodged its long-awaited “special access undertaking” (SAU) with the Australian Competition and Consumer Commission late on Friday.
Photo: Daniel Warne

by
John McDuling

The chairman of Australia’s competition regulator says the latest regulatory framework for the $37.4 billion national broadband network will protect consumers against blowouts in building costs.

Rod Sims
told the Weekend Financial Review: “Even if this ends up costing double, or whatever, you the consumer will not end up paying more."

NBN Co lodged its long-awaited special access undertaking (SAU) with the Australian Competition and Consumer Commission late on Friday. It is the third version of the document which outlines the network’s pricing and access terms for the next three decades.

“There is a lot more flexibility in this arrangement. It gives access seekers more ability to come to us. That, in essence, is the key change," Mr Sims said.

NBN Co has agreed to increased scrutiny of its capital spending and greater controls over the pricing of new products. But it has stuck with contentious usage charges that have provoked fierce criticism from its largest customer, Telstra, and one of its biggest supporters, Optus.

The submission comes after months of painstaking negotiations between NBN Co and its wholesale customers, including seminars moderated by the ACCC. The regulator expects to release a draft decision on the SAU in March following extensive consultation.

The SAU confirms NBN Co’s prices will fall in real terms over time. Prices for key products will be freezed for five years. However, it wants the ability to raise prices on certain products by the consumer price index minus 1.5 percentage points, which is higher than the previous maximum increase of half the inflation rate. The SAU also includes new mechanisms for the ACCC to resolve disputes between NBN Co and its customers.

To be treated as an investment rather than an expense on the federal budget, NBN Co must recover all of its costs and deliver a return to government. Its profits are capped at a margin of 350 basis points above the 10-year government bond rate.

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The previous version of the SAU was withdrawn after fierce protests from Telstra, which challenged NBN Co’s pricing structure, and Optus, which claimed a lack of oversight could allow NBN Co to spend recklessly, potentially damaging the economy. Wholesale customers have said usage charges do not decline as volumes grow, burdening them with higher than necessary fixed input costs that will ultimately be passed on to consumers.

The latest changes do not affect NBN Co’s revenue assumptions or broader financial model. According to its corporate plan, it expects to start generating positive earnings, before interest, tax, depreciation and amortisation by 2020 and to fully recover its costs by 2033.